How Far Can HYPE Go After Reaching New Heights with USDC Reserve Earnings Buybacks?

Author: Zhou, ChainCatcher

In late August, HYPE surged to a peak of approximately $83.5, setting a new historical high, and is currently priced around $82, having risen 37.5% in the past week and over 220% year-to-date.

According to data from hl.eco, the protocol has accumulated a net income of approximately $1.27 billion, corresponding to the on-chain destruction of about 48.17 million HYPE tokens.

About 99% of the platform's transaction fees are continuously used for buybacks and destruction of HYPE, providing a built-in buying pressure for the price. The AQAv2 mechanism, launched on August 26, will add a new source of funds for buybacks from USDC reserve earnings.

On the policy front, on August 19, Trump stated that CFTC Chairman Selig is pushing for Hyperliquid to enter the U.S. in a fully compliant manner. Meanwhile, Hyperliquid's policy center has frequently submitted opinions to the SEC and CFTC regarding three types of products: pre-IPO perpetuals, stock perpetuals, and energy perpetuals.

In terms of funding, the HYPE spot ETF has seen a cumulative net inflow of approximately $301 million since its launch. Following Trump's statement on August 20, there was a net inflow of about $5.8 million in a single day, and on August 26, another $14.7 million was recorded. HYPE treasury company PURR is also continuing to increase its holdings in the open market.

Riding on this new high, this article attempts to analyze the quality of Hyperliquid's recent price increase from three dimensions: supply side, demand side, and fundamentals.

Supply Side: A Tug of War Between Buybacks and Unlocking

The supply side determines whether HYPE's chips are becoming looser or tighter. Hyperliquid automatically converts about 99% of transaction fees into HYPE, depositing them into an Assistance Fund address that has no private key and cannot be accessed by anyone, effectively locking them permanently. In December 2025, validators will confirm with 85% of the votes that these tokens are considered destroyed.

According to hl.eco data, the protocol's cumulative income is about $1.27 billion, corresponding to the on-chain destruction of about 48.17 million HYPE, which is 4.82% of the 1 billion cap, with these tokens valued at approximately $3.9 billion at current prices.

This buyback is continuously increasing, directly driven by expanding income. According to Blockworks statistics, Hyperliquid's income for the previous week was about $16.93 million, a 196% increase from the previous week. The higher the income, the more funds are invested in buybacks.

In addition to transaction fees, there is now another source of funds for buybacks. Traders opening perpetual contracts on Hyperliquid use USDC as collateral, and currently, there are over $5 billion in USDC deposits on the platform, backed by interest-bearing assets like U.S. Treasury bonds, generating considerable interest.

On August 26, Hyperliquid launched the AQAv2 (Aligned Quote Asset v2) mechanism, using part of the earnings generated from USDC reserves to accumulate funds, which will ultimately be transferred to the assistance fund for buybacks and destruction of HYPE in the secondary market, reducing its circulating supply.

Under this mechanism, Circle is responsible for USDC technical deployment, while Coinbase manages the reserves; the stablecoin issuer is expected to share about 90% of the related reserve earnings after deducting operational costs with the protocol. The first tranche of approximately $20 million is expected to arrive on October 3, with an anticipated annual increase of $135 million to $160 million in buyback scale.

As a result, buybacks are no longer solely reliant on transaction fees; every dollar of USDC deposited on the platform also begins to contribute to buying pressure for HYPE.

On the other side of buying is unlocking. HYPE is released monthly, and since March 2026, the proportion of single unlocks relative to market capitalization has decreased from about 3.3% to about 2.7%. On August 29, approximately 14.18 million tokens, valued at about $1.1 billion, will be unlocked, accounting for about 1.4% of the total supply, equivalent to about 6% of the current circulating supply; of this, approximately 46.6% belongs to early insiders, 46.3% to the community, and 7% to the foundation.

Historically, prices usually face pressure before and after each unlocking. According to Tokenomics statistics, HYPE has averaged a decline of about 8.6% in the seven days following the last few unlocks, with some months seeing maximum drawdowns of 20-30% within two weeks post-unlocking; however, these steep declines often coincided with overall market downturns and were not solely caused by unlocking.

Whether buybacks can withstand the pressure of unlocking can be roughly estimated. Based on the current monthly buyback scale of about $60 million to $80 million, even if all unlocked tokens are sold in the short term, they can only offset about 6% to 7% of the buybacks.

Thus, the short-term pressure on the supply side comes from the unlocking at the end of the month, while the variable is whether the market can digest the new supply; the medium-term support comes from transaction fee buybacks and the AQAv2 funds arriving on October 3.

Demand Side: Who is Creating New Buying Reasons for HYPE?

Currently, HYPE's price has reached a historical high, and the next question is: Are there new funds and users willing to enter?

The biggest potential still lies in compliant entry into the U.S. On August 19, Trump stated at the White House that CFTC Chairman Selig is pushing for Hyperliquid to enter the U.S. "in a fully compliant and legal manner." Hyperliquid is currently not open to U.S. users, and once this statement transforms into an executable path, it will open up a new incremental market for U.S. retail and institutional investors.

Hyperliquid's policy center has repeatedly submitted opinion letters to the SEC and CFTC, covering pre-IPO perpetuals, stock perpetuals, and energy perpetuals, with the core demand being to regulate these contracts with futures characteristics and cash settlement as securities futures.

Binance founder Changpeng Zhao recently expressed optimism at a blockchain seminar in Wyoming, believing that if Hyperliquid can enter the U.S. in compliance, it will open up space for more decentralized products, benefiting the entire industry.

However, these developments are still at the level of opinion letters and verbal statements. Trump's mention does not equal CFTC approval; a more likely implementation method is to allow licensed institutions to access HyperCore through a licensed version of HIP-3. This part of the premium is rising the fastest and is also the easiest to retract.

On the distribution side, Coinbase is the official deployer of the platform's USDC reserves and has increased its stake in HYPE; the Base App has integrated Hyperliquid, offering eligible users up to 50x leverage across more than 200 perpetual markets. Coinbase does not directly buy HYPE, but its increased trading volume will turn into transaction fees, which will then be used for buybacks.

Further up is HIP-3. This mechanism has opened up the listing rights; as long as about 500,000 HYPE are staked, the team can independently list a new contract market, with cumulative nominal trading volume exceeding $480 billion, over 90% of which is concentrated in trade.xyz.

Recently, HIP-3 welcomed a high-profile new player, EntropyIO. It secured $14 million in funding led by Ribbit Capital and staked $40 million in HYPE, with team members from institutions like Citadel Securities, Optiver, Millennium, and Polymarket, launching Anthropic's pre-IPO market on its first day with trading exceeding $40 million within half a day.

Blockworks analysts believe that EntropyIO could become the first real threat to TradeXYZ's dominance. However, some analysts point out that HIP-3 will spark intense liquidity competition among deployers, which may not be friendly to newcomers. But as newcomers enter and compete, the products will improve for users; for the Hyperliquid ecosystem, it is truly a case of 1+1>2.

Meanwhile, there are signs that Kraken is also testing a compliant version of HIP-3 on the testnet, and traditional futures exchange CME has begun publicly discussing the impacts brought by trade.xyz and Hyperliquid.

In contrast, HIP-4 is still in its early stages. It benchmarks the on-chain prediction market Polymarket, with a total historical trading volume of about $310 million and daily active traders of about 1,000. On August 25, founder Jeff updated three features, including sub-deployer authorization, but the overall trading volume remains small.

Institutional funds are steadily entering through compliant channels. The HYPE spot ETF has seen a cumulative net inflow of about $301 million since its launch, with a total net asset value of about $409 million. The treasury company PURR, listed on NASDAQ, currently holds about 29.35 million HYPE, accounting for about 2.94% of the total supply, with a net value gain exceeding $1 billion, and continues to increase its holdings in the open market.

Fundamentals: Is There Cash Flow Support Beneath the Price?

According to ASXN data, Hyperliquid has accumulated a trading volume of approximately $5.27 trillion to date, with about 1.71 million registered users and current open contracts worth about $13.4 billion, growing about 24% in the past month.

In the perpetual DEX space, Hyperliquid currently holds about 40% market share, firmly in first place, while its closest competitors, Lighter and Aster, have daily trading volumes of less than a quarter of its own.

At the same time, the asset structure on Hyperliquid is shifting towards RWA. According to ARK Invest, in July this year, RWA trading once surged to 54%, surpassing crypto assets for the first time. Currently, about 29.8% of perpetual trading on Hyperliquid comes from RWA, with a 24-hour trading volume of about $2.9 billion.

In terms of income, Hyperliquid has an annualized income of about $748 million, making it a rare cash cow in the crypto industry. Ecosystem usage is also expanding, with HyperEVM once generating daily transaction fees of $538,100, all of which were destroyed.

However, the fundamentals are not without concerns. HIP-3 is currently highly concentrated, with the vast majority of trading still coming from the trade.xyz deployer, which can take about 50% of the transaction fees in its market. This means that while trading volumes are hitting new highs, the protocol's retained income may not grow proportionally. Whether new players like EntropyIO and Kraken can break trade.xyz's monopoly is key to this line going forward.

There are also controversies within the ecosystem. The ecosystem party Kinetiq recently proposed to create a Layer 2 called Elysium, which the market once eagerly supported. Analysts like y_cryptoanalyst pointed out that Elysium was proposed by Kinetiq and is not an official project, but rather a narrative leveraging HyperEVM's popularity. In fact, the application layer of HyperEVM has always been weak, with trading highly concentrated in the official HyperCore, leaving limited space for third-party applications, making it unlikely for the official team to personally develop an L2.

Conclusion

Bringing these three lines together, the logic behind HYPE's recent highs is roughly clear. Policy has given it valuation elasticity, buybacks have provided a supply-demand base, and fundamentals have given it rationality. The ecosystem research institution GLC Research bluntly states that the current buying pressure for HYPE is rare, and the price may soon reach three digits.

Overall, HYPE has become an indispensable asset in the crypto market. Publications like Fortune and Bloomberg frequently report on Hyperliquid, indicating that it is becoming a competitor that Wall Street must take seriously.

However, some analysts also point out that the more U.S. regulators embrace Hyperliquid, the more favorable it is in the short term, but once regulation deepens, its original advantages of not requiring account opening, KYC, and direct wallet connections may also be gradually diminished.

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